Fund manager says Myer float overpriced, opportunistic
Posted by Administrator on Sep 30, 2009
BOUTIQUE fund manager Sirius has slammed the upcoming float of department store group Myer as overpriced and an opportunistic attempt to cash in on the surging share price of rival retailer David Jones.
The company’s use of model and former Miss Universe Jennifer Hawkins to promote the IPO may also help the shares get off to a decent start, Mr Kelly said, as could predictions that the $400 million of capital investment made over the past three years will soon begin to pay off.
But he was sceptical that the company, bought from the former Coles Myer group for $1.4bn in 2006, was now worth the $3.1bn enterprise value it will carry when it lists on the stockmarket in November.
Mr Kelly also said the decision of joint 81.4 per cent shareholders TPG and Blum Capital to retain a maximum 13.5 per cent stake suggested the private equiteers were following a “pump and dump” strategy, in which over-hyped assets are sold for more than their true value.
In addition, the timing of the float, which follows a 170 per cent surge in the value of David Jones shares since March, “smells of opportunism”, Mr Kelly said.
Myer is offering between 479.3m and 499.5m shares at $3.90 to $4.90 apiece, giving it a valuation of between 14.3 and 17.3 times forecast earnings for the 2009-10 financial year.
If it lists at the higher price, Mr Kelly said that for new shareholders to receive a return of 10 per cent on their investment, Myer’s valuation would need to rise to 19 times earnings, a level he described as “outrageous”.
David Jones was yesterday trading at a P/E of 17.9 times forecast earnings, while the average valuation of stocks in the S&P/ASX 200 Consumer Discretionary Index was 17.7 times.
“Our conclusion is that the float is designed to satisfy the interests of the vendors and the highly incentivised CEO, Bernie Brookes – there is little in this for new shareholders,” Mr Kelly said.
Mr Brookes’s shares in Myer will be worth up to $57.6m following the float, while TPG and Blum stand to pocket up to $1.9bn.
